Velburg – September 11, 2026 -- Germany's push for a new federal housing corporation to fix the country's housing shortage is drawing scrutiny after Bavaria's state-run BayernHeim delivered only a fraction of its promised units, with industry experts arguing the real barrier is construction economics, not a lack of state builders.
BayernHeim delivers 1,700 units versus a 10,000-unit target set in 2018
Bavaria's state government pledged in 2018 to create 10,000 new apartments through BayernHeim by 2025. According to a response to an inquiry from state parliament member Jürgen Mistol, the company will complete only around 1,700 units by the end of 2025 -- nearly half of which stem from acquiring projects already planned by private developers. The portfolio is projected to grow to roughly 3,700 units by end-2026, still far short of the original goal.
760,700 approved German housing units remain unbuilt as completions drop 18%
National figures underline the structural problem. Germany completed 206,586 housing units in 2025, while the so-called construction backlog -- permitted but unfinished units -- reached 760,700. Completions fell 18% year-on-year, and 35,700 building permits lapsed during the year, the highest figure since 2002. The average time between permit approval and project completion climbed to 27 months, up from 20 months in 2020.
Public housing costs run 89% above the federal government's own construction target
Total investment for a state-run housing project reaches approximately €5,680 per square meter, according to available figures, compared with the federal government's own target of roughly €3,000 per square meter for pure construction costs. While the two figures are not directly comparable -- total investment includes land, site development and ancillary costs beyond construction -- the gap illustrates that low construction-cost targets alone do not guarantee affordable delivery.
State and private developers now compete for the same subsidy pools
Public housing companies rely on the same funding instruments as private developers, including KfW loans and income-based subsidy programs. With funding pools limited and subject to abrupt policy changes, this overlap adds planning uncertainty for private builders, banks and project developers already navigating volatile support schemes.
Analysts warn state expansion could crowd out private construction capacity
Dr. Peter Burnickl, managing director of Pro Bauherr GmbH and a certified expert for construction costs and building technology, argues that expanding state building activity does not address the underlying economics that make projects unviable. As public entities acquire land and draw down subsidies alongside private firms, competition intensifies for sites, funding and construction capacity -- shifting who builds housing rather than increasing overall supply.
The risk, according to this analysis, is that private investment retreats further in a market already strained by higher construction costs, elevated financing costs and an unpredictable subsidy landscape -- weakening the segment historically responsible for the bulk of new housing.
Faster permitting and stable subsidies seen as more effective than new state entities
Rather than expanding direct state construction, more reliable funding conditions, faster permitting and simplified building codes are identified as levers that could restore project viability. Sudden termination of announced subsidy programs is flagged as particularly disruptive, creating uncertainty for financing partners mid-project.